Affordability of insurance plans offered on the health insurance marketplaces

As implementation of the health reform law (the Affordable Care Act) continues, individuals that do not have insurance through an employer or government plan like Medicare or Medicaid, will be required to purchase insurance on state-based Health Insurance Marketplaces, or exchanges. Open enrollment begins October 1st for coverage that will begin as early as January 1, 2014.

As we have written about before, one unknown about the plans offered in the Marketplaces has been the out-of-pocket costs to consumers, both for premiums and health care co-pays, deductibles and coinsurance.

All of the Marketplaces will offer four “metal” level plans: bronze, silver, gold and platinum. While all plans will cover the same benefits, bronze plans will cover an average of 60% of costs; silver 70%; gold 80%; and platinum 90%. This means that bronze plans will have the lowest premiums, but higher out-of-pocket expenses for consumers, while platinum plans will have the highest premiums and lowest out-of-pocket expenses for consumers.

Tax credits will be available to people with incomes between 139 and 400 percent of the Federal poverty level (up to up to $45,960 for individuals or $94,200 for a family of 4) and will limit the amount paid in premiums for a silver plan to a certain percentage of income. Enrollees may use the tax credit toward any available plan on the Marketplace.

Last week, tworeports were released analyzing the plans that will be offered in the Health Insurance Marketplaces in the 17 states that have released detailed health plan information. These analyses, by Kaiser Family Foundation and Avalere Health, are the broadest analyses of the plans that will be offered through the Marketplaces, and what costs will be to consumers.

Overall, the news is good for consumers. Both studies show that the plans offered via the Marketplaces will generally have lower premiums than anticipated. Kaiser’s report indicated that coverage will be affordable, especially after tax credits toward premiums are considered. It is estimated that about 80 percent of consumers will be eligible for tax credits toward premiums for health plans purchased through the Marketplaces.

Though cost will vary across the country and even within states, tax credits will bring the cost for a single 40-year old to $193 per month for a silver plan, or between $97 and $168 per month for a bronze plan. Without the subsidies, Avalere Health’s report indicates that the cost for a mid-range silver plan would cost an average of $330 per month for a 40-year old. Although these studies only looked at the plans offered in a sample of U.S. states, it is felt that the findings are representative of plans that will be offered across the country.

So, what do you need to take away from this news?

If you currently do not have insurance or access to insurance through an employer, you must purchase coverage via your state’s Marketplace or potentially face a fine

Health insurance companies will not be able to deny you coverage or charge you more based on pre-existing health conditions; they are able to vary premiums based on age and tobacco use.

Tax credits are available to help pay for premiums, depending on your income and family size.

Health insurance companies offering coverage through the Marketplace must lower the amount you pay out-of-pocket (for co-pays and deductibles; not counting the premium) depending on your household income and family size. These limits apply only to silver plans, so while the annual premium for a silver plan may cost more than the premium for a bronze plan, the lower limit on out-of-pocket expenses may mean that your costs for coverage will be less, especially if you have a chronic illness like cancer.

Visit healthcare.gov or call 1-800-318-2596 to get more information on the Marketplace in your state and what tax credits you may be eligible for.

CSC will continue to provide updates on implementation of the health reform law and provide resources. We are working in partnership with a number of advocacy organizations on a checklist to assist individuals as they shop for insurance on health insurance marketplaces. We will provide that information later in September.